Fiscal consolidation by intergovernmental transfers cuts? The unpleasant effect on expenditure arrears

This chapter draws on historical statistics reporting financial outcomes for spending, taxation, debt, and deficit for the UK over a century to (a) identify quantitatively and compare the main fiscal squeeze episodes (i.e. major revenue increases, spending cuts, or both) in terms of type (soft squeezes and hard squeezes, spending squeezes, and revenue squeezes), depth, and length; (b) compare these periods of austerity against measures of fiscal consolidation in terms of deficit reduction; and (c) identify economic and financial conditions before and after the various squeezes. It explores the extent to which the identification of squeeze episodes and their classification is sensitive to which thresholds are set and what data sources are used. The chapter identifies major changes over time that emerge from this analysis over the changing depth and types of squeeze.

Download Full-text

The IMF, the UK Policy Debate, and Debt and Deficit Discourse

10.1093/oso/9780198813088.003.0006 ◽

2018 ◽

Author(s):

Ben Clift

Keyword(s):

Adverse Effects ◽

Coalition Government ◽

Policy Debate ◽

Fiscal Consolidation ◽

Policy Space ◽

Fiscal Multipliers ◽

Scientific Image ◽

The Uk ◽

Deep Recession ◽

The Imf

This chapter charts changing character of the economic ideas informing fiscal policymaking in Britain, and Fund responses to them. Drawing on interviews with the Fund’s UK Missions and UK authorities, it shows how, despite the IMF’s prizing of its non-political, scientific image, its differing views of UK policy space and prioritization became the stuff of a contested politics. The central assumption of the coalition government’s construction of fiscal rectitude was that Britain faced a ‘crisis of debt’, yet the IMF did not share this view. Fund work on fiscal multipliers being higher during recessions, and the adverse effects of fiscal consolidation on growth, all had pointed relevance for UK policy. The coalition government saw little potential for activist fiscal policy in support of growth. In 2013 Blanchard accused the UK authorities of ‘playing with fire’ by pursuing excessively harsh austerity which threatened a prolonged and deep recession.

Download Full-text

Is Expenditure by States for Development Compromised to Ensure Compliance of Fiscal Targets? A Study of Indian States

Arthaniti-Journal of Economic Theory and Practice ◽

10.1177/0976747920966871 ◽

2020 ◽

pp. 097674792096687

Author(s):

H. K. Dwivedi ◽

Sudip Kumar Sinha

Keyword(s):

The State ◽

Capital Account ◽

General Category ◽

Fiscal Deficit ◽

Fiscal Consolidation ◽

Indian States ◽

Corrective Measures ◽

Additional Amount ◽

Three Phases

This article examines the interlinkage between fiscal consolidation targets and states’ developmental expenditure under capital account. While fiscal consolidation targets have enabled states to take corrective measures to reduce deficit under the revenue account, the effect of the same is studied on developmental expenditure under capital account. For analysis, the fiscal deficit and developmental expenditure under the capital account have been compared with the fiscal deficit targets and general category states’ average benchmarks for fiscal indicators for three phases (corresponding to the periods of three finance commissions). It is argued, that, while fiscal consolidation has helped to improve the state finances, the stringent fiscal targets have further reduced the developmental expenditure under capital account. In view of this, it is suggested that the states, which are historically stressed, should be allowed to borrow an additional amount of 0.25 per cent of GSDP each year over and above the existing limit, provided these states make efforts to reduce deficit under revenue account and spend the extra borrowings on developmental expenditure under capital account.

Download Full-text

The Effect of Results-Based Intergovernmental Transfers in the Educational Accountability System: An Examination of the Race to the Top Program

Public Performance & Management Review ◽

10.1080/15309576.2021.1881802 ◽

2021 ◽

pp. 1-29

Author(s):

Angie Nga Le ◽

Hai (David) Guo

Keyword(s):

Race To The Top ◽

Educational Accountability ◽

Intergovernmental Transfers ◽

Accountability System

Download Full-text

Mediating distributive politics: political alignment and electoral business cycle effects on municipality financing in Greece

The Annals of Regional Science ◽

10.1007/s00168-020-01038-7 ◽

2021 ◽

Author(s):

Anastasios Kitsos ◽

Antonios Proestakis

Keyword(s):

Business Cycle ◽

Fixed Effects ◽

Central Government ◽

Intergovernmental Transfers ◽

Negative Effects ◽

National Elections ◽

Data Set ◽

Resource Misallocation ◽

Run Up ◽

Political Alignment

AbstractWe examine the role of political alignment and the electoral business cycle on municipality revenues in Greece for the period 2003–2010. The misallocation of resources for political gain represents a waste of resources with significant negative effects on local growth and effective decentralization. The focus of our analysis is municipality mayors since they mediate the relationship between central government and voters and hence can influence the effectiveness of any potential pork-barrelling activity. A novel panel data set combining the results of two local and three national elections with annual municipality budgets is used to run a fixed-effects econometric model. This allows us to identify whether the political alignment between mayors and central government affects municipality financing. We examine this at different stages of local and national electoral cycles, investigating both direct intergovernmental transfers (grants) and the remaining sources of local revenues (own revenues, loans). We find that total revenues are significantly higher for aligned municipalities in the run-up to elections due to higher intergovernmental transfers. We also find evidence that the 2008 crisis has reduced such pork-barrelling activity. This significant resource misallocation increases vertical networking dependency and calls for policy changes promoting greater decentralization and encouraging innovation in local revenue raising.

Download Full-text